Home is a small country. The figure below shows the Home no-trade equilibrium under perfect competition (with the price PC), and under Home monopoly (with the price PM). Assume that after open to trade, the international market price is P W, which is lower than P C .

a. Under perfect competition with free trade, please label the triangle of consumer surplus and the triangle of producer surplus. Outline the area representing gains from free trade under perfect competition.

b. Under a home monopoly with free trade, please label the triangle of consumer surplus and the triangle of producer surplus. Outline the area of gains from free trade under home monopoly.

c. Compare the welfare gains in questions a and b. Which one is higher? Why?